You decide to take the family on a nice vacation. You spent hours planning the hotel, airline flights, and packing the clothes. You also decided to rent a car for the week. You are now standing at the rental car counter with a long line behind you. You are excited about the great rate you got on the car for the week. You are all set to have a great vacation with the family. Then you are handed a clipboard with a confusing rental car contract with a list of insurance options. You start freaking out! You didn't spend any time at all researching rental car insurance. You now wish you had spent less time packing and more time researching rental car insurance.
What Does My Personal Policy Already Cover?
Your personal auto policy includes liability coverage and any additional coverages that you have opted for, such as comprehensive or collision insurance. These coverages may extend to your rental car.
Liability coverage may help pay for another person's medical bills or damage to another person's property if you cause an accident in your vehicle (or your rental vehicle).
Comprehensive coverage may help pay to repair your vehicle (or your rental car) if is damaged by a covered peril, such as theft, wind, fire, or natural disasters. Your comprehensive coverage's deductible will apply.
Collision coverage may help pay to repair your vehicle if it's damaged when you collide with another vehicle or object, such as a fence or a tree. Your collision coverage's deductible will apply.
Rental Car Insurance Options
Know the offerings available before you even reach the rental counter. Most rental companies have a short and predictable suite of offerings. You may be able to decline the offered coverage if you are already properly covered with your auto insurance policy. Rental car insurance is broken out into the following categories:
Liability Coverage: This is a standard part of car insurance policies. It is intended to help protect you if you injure someone or damage their property while driving. If you have adequate liability coverage through your own auto insurance, you may not need to buy extra coverage from the rental company.
Personal Accident Insurance: Covers your and your passengers' medical bills if you are injured in a rental car accident. If you have personal injury protection (PIP) or medical payments coverage on your auto policy along with adequate personal health insurance, you may already have coverage comparable to what the rental company offers. Medical payments coverage and personal injury protection may help pay for medical bills due to a covered car accident.
Personal Effects Coverage: This may help cover your personal belongings, such as your laptop or clothing, if they are stolen from the rental car. If you have a homeowners or renters insurance, the personal property coverage on that policy helps cover your personal items through that is known as off-premises coverage. Note that off-premises items are usually only covered up a certain percentage of your personal property coverage. The deductible on your homeowners or renters insurance will apply.
Collision/Loss Damage Waiver (known as a CDW or LDW): This is not insurance, but rather a waiver that transfers financial responsibility from you to the rental car company in case of damage or theft. The waiver covers only the rental vehicle and means that the rental company waives its right to pursue you for damage. In NY, you don't need this coverage since you are protected for any physical damage to the rental car under the NY Rental Coverage Endorsement.
New York Rental Coverage Endorsement
In most states, if you only have liability insurance on your personal auto policy, it will protect you if you damage another vehicle, but it will not cover any of the costs of repairing your rental vehicle. In this case, purchasing the Collision Damage Waiver (CDW) would be a good option. Without the CDW or personal collision and comprehensive insurance, you would be responsible for any repair costs and loss-of-use fees you incur on the rental, even if you weren't at fault for the accident.
In New York, every auto policy issued has physical damage coverage for a rental car, whether or not you have collision and comprehensive coverage. NY is unique with this type of coverage.
The New York "Rental Coverage Endorsement"explicitly states:
- This endorsement provides coverage for the insured's obligations in the event of actual damage to, or loss of, any "rented vehicle".
- including loss of use, rented by the "insured"
- anywhere in the United States, its territories or possessions, Puerto Rico, or Canada
- under a rental agreement with a term no longer than thirty continuous days.
The language provides very broad coverage and includes nearly all types of physical damage to a rental car, except for fraudulent acts. Coverage is expected to include additional costs that rental car companies sometimes attach to a loss such as: diminution of value, loss of use, rental fees and administrative fees. Coverage is also provided without regard to the policy limits of liability to which the endorsement is attached. You would be covered for the full amount of damages to the rented vehicles.
Unlike other states, there are very few reasons why NY auto insurance owners may want to consider the purchase of a rental company's damage waiver (CDW) or have alternative rental car coverage in place. But here are a couple:
Why Some People Add Car Rental Insurance in NY
Renting a car outside of your policy's operating territory: All coverage is excluded while renting a car outside of the United States, its territories and possessions, Puerto Rico, and Canada. Purchasing the damage waiver, liability and personal accident insurance options would be prudent while renting a vehicle outside these places.
Don't have to use your own insurance: Claims payments under the NY Rental Vehicle Coverage Endorsement are considered a loss under your auto policy's liability coverage part. Rental vehicle losses could negatively affect your auto policy. It could result in loss of safe driver and claims free discounts, a high rate increase, or possibly being non-renewed by your auto insurance company. If you are an at-risk driver, you may want to protect your auto policy premiums and purchase the CDW, liability, or personal accident insurance. In this case if you have a claim, you can file it against the rental car insurance and not your own auto insurance.
Rental Insurance Through Credit Card Company
Car rentals require a credit card. If there are any gaps in coverage with your personal auto policy, the credit card company could provide secondary coverage. This coverage would only apply after your personal insurance policy is applied. It often comes with stipulations, such as a requirement that you decline the CDW offered by the rental company, the rental does not exceed a certain number of days, and all other insurance policies available to the driver have been exhausted. Some cards will exclude coverage for all trucks, full-size vans, and antique vehicles. You might be able to find credit cards that offer primary coverage, but finding those takes a bit more work. Carefully examine your credit card's benefits and exclusions before you decide on using it for your rental insurance.
Contact us today if you have any questions about your personal auto policy and rental coverage!
Read a few more of our auto insurance blogs:
Car Insurance For a Teenage Driver
Understanding Collision and Comprehensive Coverage
Written by Pepe Insurance Agency